By David Henry and Sweta Singh
REUTERS - JPMorgan Chase & Co, the biggest U.S. bank by assets, reported a better-than-expected quarterly profit on Friday due to strong loan growth and higher interest rates.
The bank's borrowing business increased across residential mortgages, business loans, credit cards, and even auto loans, an area where some lenders have been pulling back.
Its average core loan book grew 8 percent in the second quarter compared with the same period a year earlier, while higher interest rates helped JPMorgan earn more money on them.
"The U.S. consumer remains healthy," Chief Executive Officer Jamie Dimon said in a statement.
Overall net income rose 13 percent to $7.03 billion, or $1.82 per share, from $6.2 billion, or $1.55 per share, in the year-ago quarter. (http://bit.ly/2tQ630n)
Excluding a gain from a legal settlement, the bank earned $1.71 per share, topping the average analyst estimate of $1.58, according to Thomson Reuters I/B/E/S.
Its stock dropped 1.5 percent to $91.74 in premarket trading. JPMorgan shares have risen 7.9 percent this year, mirroring gains in the broader S&P 500 Financial Index.
The Federal Reserve lifted interest rates for the second time this year in June. Rising rates are usually good for banks, allowing them to increase how much they charge for loans faster than they boost how much they pay for deposits.
But as JPMorgan's loan book has expanded, it has also set aside more money for borrowers who do not repay their debts.
In credit cards, where it has been growing aggressively, the bank built loan-loss reserves by $252 million as the business's charge-off rate ticked above 3 percent, an increase from both the prior and year-ago periods.
JPMorgan executives have told investors to expect credit card loss rates to go up as the company makes more loans. On newer card accounts, the bank sees charge-off rates of about 4.5 percent, Gordon Smith, head of consumer banking, said at an investor conference in June.
Trading revenue was a dark spot for JPMorgan as volatility hit multiyear lows. But executives across Wall Street have been warning investors to look for declines because the year-ago quarter benefited from a surge in trading around the UK's Brexit vote.
JPMorgan's markets revenue dropped 14 percent to $3.22 billion, mostly due to fixed income trading. It was the first decline in five quarters.
Wells Fargo & Co and Citigroup Inc both reported results on Friday.
(Reporting by Sweta Singh in Bengaluru and David Henry in New York; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)
Disclaimer: No Business Standard Journalist was involved in creation of this content
